Timothy J. Sierra, Attorney at Law Trusted Florida Bankruptcy Attorney Since 1987
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Debt Collectors and Bankruptcy

Many debtors in bankruptcy may have been fielding calls from debt collectors prior to the filing of the bankruptcy case. Some of the calls from these debt collectors, whether they are third party collectors or original creditors, can give rise to a claim for damages under federal law and state law. They right to sue the debt collector can be an asset in a bankruptcy case. Several factors have to happen before a bankruptcy trustee can sue a debtor collector on behalf of a debtor and collect the money for distribution to creditors.

First, the contact from debt collector has to arise prior to the filing of the bankruptcy petition. With limited exceptions, a bankruptcy estate consists of any and all interests of a debtor on the date of the filing of a case. If a contact from a debt collector occurs prior to the filing of a bankruptcy case, then the right to pursue that claim belongs to the trustee. If it happens after the filing, then the claim belongs to the individual.

Second, the contact must constitute a violation of federal or state collection laws. The federal statute is the Fair Debt Collection Practices Act, 11 USC §1692 which provides some of the strongest protections provided by federal and state law. Florida has a state statute for consumer debt collection, Fla.Stat.  559.72. One important difference between the two statutes is that the Federal law applies to third party debt collectors. The Florida statute applies to both original and third party collectors. In addition, a cause of action can be brought under 47 USC § 227 under Telephone Consumer Protection Act.

Third, the trustee has to prevail in the lawsuit against the debt collectors. If nothing is recovered, nothing can be paid to the creditors of the estate.

Also, the asset has to be nonexempt. Under Florida law, a debtor without claiming the benefit of a homestead exemption can claim up to $5,000.00 in personal property, a married couple, $10,000.00. A debtor could claim an award for violations of debt collection practices as an exempt asset. If the trustee were to sue and recover money, the exempted amount claimed by the debtor must be paid prior to the distribution to other creditors.

Always keep a log of calls from debt collectors. The more detail the better. These cases can be brought before the filing of a bankruptcy case to avoid having the asset fall into the hands of a bankruptcy trustee. If the case is successful, the damage award may be enough to fund the cost of a bankruptcy.

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